N.J. budget shortfall grows to $800 million

Governor Christie shaking hands with lawmakers on his way in to deliver his budget address in February.

Governor Christie’s predictions for tax collections have missed the mark, amounting to an $800 million shortfall that leaves little time and few places for the governor and lawmakers to find savings.

Christie, a Republican who preaches fiscal discipline, has been forced into several budget fixes in recent years to offset missed revenue projections and not break the state constitution’s requirement for a balanced budget. Last year, Treasury delayed about $400 million in property tax relief, and earlier this year the state cut spending by $700 million through a series of lapses and other adjustments.

On Monday, state Treasurer Andrew Sidamon-Eristoff announced the latest bad fiscal news and warned of new budget cuts and “impounding budgeted appropriations.” He said more details would be released in a few weeks.

In past years, governors have delayed school aid and held back pension contributions to alleviate last-minute shortfalls. Sidamon-Eristoff would only say Monday that budget changes will be announced when he comes before lawmakers again on May 21 and 22.

“The state will take any and all actions necessary to offset the reductions in anticipated revenues, including the identification of additional lapses and savings opportunities, as well as the exercise of the full range and scope of executive authority, including, but not limited to, reserving and/or impounding budgeted appropriations,” Sidamon-Eristoff said in a news release.

Christie’s prior budget changes drew the attention of Wall Street ratings agency Standard & Poor’s, which cited the governor’s “bullish revenue assumptions” and the frequent use of “one-time measures” as factors in the downgrading of New Jersey’s credit rating announced earlier this month.

The agency also warned another ratings downgrade could come if forecasted growth estimates “fail to materialize.”

While the earlier revenue misses came as a result of Christie overestimating the state’s recovery from the latest recession, this time the shortfall comes as the result of a national trend affecting states like New Jersey and Connecticut that rely heavily on high-income earners. Effects of 2012 federal tax policy changes known as the “fiscal cliff” made New Jersey extremely reliant on guessing final payments from the very rich that the state ultimately got wrong as it set spending for the current, $33 billion budget.

David Rosen, budget analyst from New Jersey’s non-partisan Office of Legislative Services, told lawmakers earlier this month that he doubted Christie’s revenue projections would come through. But his own estimates were only $87 million less than the governor’s, far short of the actual gap in tax collections announced Monday.

The month of April has been particularly hard on New Jersey’s $33 billion budget. Revenue from the state’s three major taxes, the income, sales and business taxes, is expected to fall $600 million short of projections for the month, according to the latest data from the state Department of Treasury.

The latest official state revenue report released earlier this month indicated tax collections were off from the Christie administration’s revenue projections by $145 million, but Treasury now expects to collect $807 million less than it thought it would when it reset spending for the current fiscal year back in February

The news of the much bigger shortfall comes with just weeks left in the current fiscal year, which ends on June 30. It also comes just as lawmakers are trying to decide what to do about the $34.4 billion spending plan Christie has proposed for the fiscal year that begins on July 1.

“The time frame and decisions that have to be made have become a lot more difficult,” he said.

The governor is calling for spending to increase by more than $1 billion in the next fiscal year, counting on nearly 6 percent revenue growth through the end of June 2015. Lawmakers can either adopt Christie’s budget unchanged or send him their own appropriations bill.

“We’ve been warning the administration for the past four years that their assumptions on revenue numbers have been way too aggressive,” he said. “Unfortunately, the Democrats, and our analysis, have been correct.”

Treasury initially disclosed the revenue shortfall in a supplement issued Monday for a bond sale that is raising revenue for higher education facilities.

In Connecticut, Democratic Gov. Dannel Malloy announced Monday that his state would pull back a property tax rebate proposal and a pension fund contribution because of a revenue shortfall also tied to the 2012 federal tax policy changes.